Effort to exempt new apartment buildings in L.A. from 'mansion tax' moves forward

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An effort to exempt new apartment buildings in Los Angeles from the so-called mansion tax moved forward Wednesday, amid concerns that the tax is suppressing housing construction and making the affordability crisis worse.In a 9 to 5 vote, the City Council directed the City Attorney to draft a ballot measure that would ask voters to change Measure ULA, which funds subsidized housing construction and homeless prevention efforts by taxing nearly all property sales over $5.3 million.Once the proposal is drafted, it must come back to council for a final approval to make it onto the November ballot.Wednesday was the deadline for the council to take the vote and stay on track to make the ballot this fall, said Councilmember Katy Yaroslavsky, who introduced the proposal along with Councilmember Tim McOsker.

“We should protect what is working and fix what’s not,” Yaroslavsky told colleagues before the vote.“If we fail to act today, that door closes.”The ULA tax, approved by voters in 2022, is known as the mansion tax but applies a 4% tax to nearly all properties — whether they are mansions or not — if they sell for more than $5.3 million, increasing to 5.5% for sales at or above $10.6 million.Under the proposed ballot measure, the ULA tax wouldn’t apply to multifamily buildings sold within 10 years of construction.

There would also be some more technical changes put before voters, including to allow ULA money to be spent on temporary housing for homeless people.Since ULA passed, apartment construction in Los Angeles has plummeted.Some studies have found that the additional tax on property sales has played a big role in the drop-off by adding extra costs for developers.

That’s led to fears that the tax, in some ways, is making the affordability crisis worse by suppressing new supply.A coalition of business groups and pro-development activists have been pushing the council...